Han Qiang: Discussion with Professor Wu Jinglian — Can There Be Double Standards in Academic Discourse?
I. The passage Professor Wu said was “Highly enlightening and [which I] wish to offer for your consideration”
Recently, the Shanghai Securities News published an interview with Professor Wu, in which one passage was particularly striking:
Reporter: Do you and Professor Lang Xianping have major disagreements regarding state-owned enterprise (SOE) reform?
Wu Jinglian: I said that I agree with Lang Xianping’s statement on “opposing the theft of state assets,” and that one should “not reject the words because of the speaker” [1]. However, I oppose his claim that “SOE reform is a mistake.” Consequently, some people published articles saying Lang Xianping never said SOE reform was wrong. Then, a few days later, Lang himself published an article titled “SOE Reform Has Sparked Divine Wrath and Human Resentment” [2]. Should you listen to Lang Xianping, or to those representing him? I believe we should establish rules for academic discussion; without such rules, I am not prepared to participate.
Reporter: Some people say you “disdain the poor and love the rich,” and that you support the wealthy and the capitalist class. How do you view this claim?
Wu Jinglian: I don’t know where this claim comes from. It is like the time someone pointed out that I said “the poor oppose reform.” In reality, that was a transcription error by others; my original text did not say that. The next day, China Youth Daily published a correction notice, and later Caijing magazine published my full text. (Wu Jinglian: I Have Never Disdained the Poor and Loved the Rich, Shanghai Securities News, March 8, 2006).
After reading these remarks by Professor Wu, one is prompted to ask: Did Professor Wu actually say “the poor oppose reform,” or was it truly a transcription error? Let us examine the “Four-Person Dialogue” in Caijing from November 2005, the China Youth Daily article from December, and the Caijing article from January 17, 2006:
Professor Wu Jinglian’s first remarks: “Confusing two types of inequality and directing the spearhead mainly at the problem of inequality of outcome is to conflate ‘anti-corruption’ with ‘anti-wealth.’ Directing the spearhead not at corrupt officials or ‘red-topped businessmen’ [3], but at the upper levels of the middle-income strata—such as doctors, professors, SOE executives, and small-to-medium enterprise owners—is also politically incorrect. It is easy to confuse ‘corruption’ (fǔ) with ‘wealth’ (fù), but it is the responsibility of leaders and the media to help the public distinguish between the two and truly understand who are our friends and who are our enemies. What is worrying is that focus now seems to be concentrated on inequality of outcome, leading to desires to cap the maximum salaries of SOE managers, impose high taxes on the wealthy in general, and even frequently talk of ‘opening fire on the rich.’ Such rhetoric and practices not only miss the point but will lead to serious social consequences. The wealth gap is caused by corruption and the use of power to trade for income—that is, power-based rent-seeking.” (Wu Jinglian, Gao Shangquan, Jiang Ping, and Xu Xiaonian: A Four-Person Dialogue, Caijing, November 25, 2005).
Professor Wu Jinglian’s second remarks: “‘Who might oppose reform? One is the vested interest groups, and the other is the impoverished groups. They may form an alliance against the market system. Under the slogan of compensating for market defects, the masses remain entirely unaware that their fates are being changed as a result.’ Famous economist Wu Jinglian unexpectedly ended his keynote speech today at the Caijing 2006 Annual Meeting with this passage.”
“Why did this economist, known for his rationality, become emotional? Wu Jinglian’s words carried a deep hidden worry. Recently, in an interview with the media, he said that income inequality has two possible sources: one is inequality of opportunity, and the other is inequality of outcome. Currently, the wealth gap in Chinese society arises primarily from inequality of opportunity. He explained that just as corrupt officials easily become decamillionaires or billionaires through the theft of public property and the buying and selling of government posts, the focus now seems concentrated on inequality of outcome... The wealth gap is caused by corruption and the use of power to trade for income—that is, power-based rent-seeking.” (Wu Jinglian Moved to Emotion: Who Might Form an Alliance Against the Market System, China Youth Daily, December 13, 2005).
Professor Wu Jinglian’s third remarks: “A while ago I read a book titled Saving Capitalism from the Capitalists. There is a passage in it that says: ‘The free-market economy is the most efficient way of organizing production and arranging distribution created by humanity. However, its development requires a series of sound institutional arrangements as its infrastructure, and the establishment and maintenance of this infrastructure requires a favorable political environment. This political environment faces threats from two sides: the first threat comes from vested interest groups who have already occupied a strong position in the market and attempt to maintain that position. The second threat comes from the vast impoverished population. These two groups of people, though appearing extremely disparate in status, can exert enormous influence once they form an alliance on the issue of opposing the market system, leading the government to take interventionist actions against the market. These actions ostensibly fly the banner of correcting market defects, but in reality, they hinder the effective operation of the market. The masses not only fail to protest but even cheer, entirely unaware that their future will be harmed as a result.’ I personally found this passage highly enlightening and wish to offer it here for your consideration.”
The author is a researcher at the Development Research Center of the State Council. This article is the author’s speech at the “Caijing Annual Meeting: 2006 Forecasts and Strategies.” (Wu Jinglian: The Key to Achieving Sustainable Development Lies in the Transformation of Government Functions, January 17, 2006, Caijing magazine).
Looking at these three sets of remarks, the passage about not “opening fire on the rich” first appeared in the Caijing “Four-Person Dialogue” without the mention of “who might oppose reform? One is the vested interest groups, and the other is the impoverished groups.” It then appeared in China Youth Daily. There is indeed a difference between China Youth Daily and Caijing regarding the claim that anti-marketization “comes from the impoverished population.” So, how significant is this difference? The difference lies in the fact that Professor Wu was quoting a passage from Saving Capitalism from the Capitalists; this is what Professor Wu meant when he said “Caijing magazine later published my full text.” China Youth Daily took the quoted words as Professor Wu’s own words, which is what he meant by “others made a mistake when transcribing.”
Now, let us continue the analysis. There are two types of citations: one is to present a different viewpoint and offer a critique after quoting; the other is to express that one has been enlightened after quoting. Professor Wu said: “I personally found this passage highly enlightening and wish to offer it here for your consideration.”
Therefore, this entire passage—stating that the first threat comes from vested interests and the second from the vast impoverished population—was clearly enlightening to Professor Wu, and he admires it. Otherwise, he would not have “offered it for your consideration.” Who offers words they do not approve of “for your consideration”?
We ask Professor Wu to speak clearly: regarding this passage he called “highly enlightening” and “offered for your consideration,” does he actually agree with it or not? If he does not agree, he could completely deny having said “the poor oppose reform.” But if it was “highly enlightening” and “offered for your consideration,” can he say he disagrees?
Then, may I ask: How should we understand the passage Professor Wu quoted and praised? Should we understand it as something Professor Wu agrees with, or disagrees with? If he disagrees, why did he say it was “highly enlightening”?
Does Professor Wu not want to establish “rules for academic discussion”? Then please follow those rules yourself first, and do not be so ambiguous.
II. Do not complain when others label you while you are busy labeling them
During a speech at the “China Economists 50 Forum,” Wu Jinglian reflected on the reforms and argued:
- The corporatization of large SOEs, the reform of management and ownership systems in monopolistic industries, and the market-based allocation of basic economic resources have progressed slowly due to numerous obstacles.
- The second defect is that the rule-of-law environment necessary for the normal operation of a modern market economy has long failed to be established.
- The third defect is that public services the government must provide—such as education and basic social security—have not been strengthened but rather show a trend of weakening.
- The fourth defect is that the extensive growth mode, suited to the traditional socialist economic and social system, is difficult to transform into an intensive growth mode.
He then said: As intellectuals, economists should follow the spirit of “academic independence and freedom of thought,” presenting their insights with sound reasoning and substantial evidence, and taking independent responsibility for whether these insights meet academic norms.
Wu Jinglian noted that the public is puzzled and even strongly dissatisfied by the widespread existence of various negative phenomena, and people in academic circles have produced very different interpretations of the causes of these phenomena.
Evaluating certain interpretations existing in the academic community, Wu Jinglian said that some “Old Guard” [4] of the traditional socialist system are exploiting the public’s dissatisfaction with China’s current social situation and the legitimate questioning of certain problems in reform and development by academics. They are re-proposing the proposition—already raised over a decade ago—that “abolishing the planned economy and implementing marketization” is equivalent to “changing the socialist system and implementing the capitalist system.” They claim that China’s reforms over the past 20-plus years have been dominated by “Western neoliberal mainstream economics” and have executed an opportunistic line, or what they call a “reform line of bourgeois liberalization” [5]. Wu Jinglian said these people are currently striving to lead people in the direction of anti-market reform. (Wu Jinglian: Some are Striving to Lead People Toward Anti-Market Reform, February 13, 2006, China Youth Daily).
We must ask: If this is an academic discussion, different opinions should be allowed to exist. Yet Wu Jinglian speaks of the “Old Guard” of the traditional socialist system “exploiting dissatisfaction” and “re-proposing propositions.”
Based on press reports, we have yet to see any economist or scholar put forward such a viewpoint. This seems like tilting at windmills and pinning labels on people. One cannot help but ask: Is this an academic discussion, or are you opening a “label factory” [6]? This practice of elevating issues to the level of political principle [7] to suppress different viewpoints reminds one of when five major economists criticized Wu Jinglian’s “Casino Theory” [8]. Professor Wu had only said it was “like a casino,” but it was changed to “is a casino.” Can an academic discussion proceed with such subversion of concepts?
I have searched many dictionaries but cannot find an explanation for the “Old Guard of the traditional socialist system.” If you want to criticize a viewpoint, then criticize the viewpoint; why add the term “Old Guard”? Or is it that you only allow yourself to criticize others by elevating issues to political principles, while being unable to tolerate the viewpoints of others?
III. Opposing a bad market economy is not equal to opposing the market economy
Professor Wu Jinglian has consistently argued that there are two types of market economies: one good and one bad. In this view, "market economy" is a general category, while a "good market economy" and a "bad market economy" are specific sub-concepts. Therefore, opposing a "bad market economy" is not equivalent to opposing the "market economy" itself. The broad masses' criticism of hyper-inflated medical costs, education fees, and housing prices is an opposition to a "bad market economy." This is because the extensive marketization of public welfare undertakings such as healthcare and education does not align with the current practices of developed countries. Furthermore, the hyper-inflated prices in real estate are not only unbearable for ordinary people but have also generated a massive volume of long-term loans, hindering the adjustment of the industrial structure. More importantly, these "three highs" have suppressed domestic demand, creating an economic bottleneck.
Professor Wu speaks at length about the rule of law. We must then ask: if "socialist public property is sacred and inviolable," why have state-owned assets been sold off by certain local governments without discussion and approval by the People's Congress? How are the people's right to know and right to supervise being manifested? Is the selling of state-owned assets at rock-bottom prices [9] illegal? Is such selling a manifestation of a "bad market economy"?
The broad masses oppose a bad market economy precisely because they desire a good one.
Finally, I must say that I hold Professor Wu in high regard. Speaking to Seek Truth from Facts, I still vividly remember his article "The Stock Market Cannot Be Too Dark," published in Southern Weekly in 2000. I also vividly remember his 2001 program on CCTV (China Central Television) criticizing the lack of regulation in the stock market. I wrote many articles at the time explaining that "being like a casino" and "being a casino" are different concepts, the crux being the criticism of market irregularities. Even now, I believe that the decline of the stock market in recent years has nothing to do with Professor Wu's personal views. What needs reflection is why the A-share [10] market remains unregulated.
However, some of the viewpoints expressed by Professor Wu in interviews over the past two years have left people feeling as if they are "lost in the clouds and mist" [11]. For example, in an interview with a journalist from Jinling Evening News, Professor Wu stated that "tradable shareholders are in a dominant position" and that "who, ultimately, are the non-tradable shareholders? They are the whole people." This confuses concepts. The current A-share market contains both private and state-owned enterprises. The non-tradable shares of a listed private enterprise belong to the founders, not to "the whole people." If one claims these shares belong to the whole people, would the major private shareholders agree? Would this not amount to the expropriation of private property? Would this be legal? One can only say that the state-owned shares and state-owned legal-person shares of state-controlled companies belong to the whole people. Additionally, some legal-person shares have already been purchased by private firms and thus belong to those private buyers.
Professor Wu’s claim that "tradable shareholders are in a dominant position" effectively pits 1.3 billion people against 39 million individual investors (calculated by dual-account holders in the Shenzhen and Shanghai markets). These 39 million investors represent 39 million families—over 100 million people. Are these 100 million people not part of "the people"? Because 39 million investors bought tradable shares, do they cease to be part of the people? From a legal perspective, these 39 million investors are "dual shareholders": they are shareholders of the stocks they hold, and they are also [part-owners of] the state-owned non-tradable shares. They have a stake in state-owned assets as well.
By claiming "the non-tradable shareholders are ultimately the whole people," Professor Wu on one hand expropriates the private equity of non-tradable shares in listed private firms, and on the other hand strips 39 million investors of their rights regarding state-owned shares. This is logically chaotic.
Professor Wu Jinglian also stated: "Previously, with state-owned banks, we worked for many years only to see their capital base drop to zero or even negative numbers. How can investors trust such a bank? The first to enter must take a risk; only then will later investors follow, and the price will rise." He added, "It is understandable that Chinese people are prone to nationalist sentiment [12] and can easily become emotional. However, if they are too emotional, problems arise. To solve the issues of state-owned banks, we must carefully identify the crux of the problem." (Wu Jinglian Disagrees with the 'Selling State Banks for a Song' Theory, Claims Chinese People Are Prone to Emotion, News from The Beijing News, December 10, 2005).
First, we must clarify that before being listed, state-owned banks underwent asset stripping [13]; their capital was not zero. These assets are not merely entries on a ledger; they possess strategic significance for a national financial system. Let us compare the A-share and H-share [14] markets: if the bank stocks listed in Hong Kong were not "sold for a song," then the bank stocks issued in the A-share market were "sold at a premium." Since these are the same bank stocks, why is the domestic IPO price several times higher? If the domestic price is appropriate, then the Hong Kong issuance was indeed a "fire sale." Why is it several times lower than the domestic price?
Furthermore, we invite the Chief Economist of CICC (China International Capital Corporation), Wu Jinglian, to explain: the IPO price for Sinopec A-shares was 4.22 RMB, while the H-share IPO price was 1.60 HKD. The gap is more than double. Was the H-share sold too cheaply, or was the A-share sold too dearly? At that time, the Social Security Fund entered the A-share market at 4.22 RMB and was "trapped" [15] for a long time. Although the Social Security Fund has now broken even, it is watching the H-shares make a profit. What kind of problem is this?
Professor Wu says that "the first to enter must take a risk." Between the A-share and H-share entrants, who took the greater risk? Everyone knows the H-share risk was smaller. So, Professor Wu, please tell us: why was the Social Security Fund made to enter the high-risk A-share market, while the low-risk H-shares were reserved for international investors? Does the Professor not preach "equality of opportunity" every day? Why was there an inequality of opportunity between the Social Security Fund and international investors?
Professor Wu is the Chief Economist of CICC, and CICC was the underwriter for Sinopec. The H-share was issued in Hong Kong at 1.60 HKD, while the A-share was issued domestically at 4.22 RMB. The price difference between 1.60 and 4.22 became the company's capital reserve, which was immediately owned by all investors, including those in Hong Kong and abroad. This allowed international shareholders to swallow the assets of domestic investors. Why did Professor Wu remain silent in 2001 regarding this inequality of opportunity between domestic and international investors? And why does he now defend international investors entering bank stocks? Is this not "hoodwinking" [16] us common folk!
Furthermore, when CNOOC's (China National Offshore Oil Corporation) acquisition of an American oil company was obstructed by certain members of the U.S. Congress, why did Professor Wu not call those U.S. congressmen "emotional"? Instead, he reflexively accused Chinese people of being "prone to nationalist sentiment." Do Americans not have nationalist sentiments?
We invite the famous economist Professor Wu Jinglian to look at these reports:
According to the Wall Street Journal, Chevron has been lobbying Congress to block CNOOC’s bid for Unocal. Driven by Chevron, more than 40 U.S. congressmen submitted an open letter to President Bush, demanding an immediate and rigorous review of CNOOC’s merger plan in the name of national security and energy security. (Unocal Postpones Voting Announcement, CNOOC Acquisition Case Remains Unresolved, China Business Times, July 18, 2005)
Recently, CNOOC's acquisition of the American oil giant Unocal caused panic in the U.S. media, which played up the "China Economic Threat" theory, fearing the U.S. would become a subordinate nation. The New York Times wrote on July 31 that these reports were short-sighted and ignorant, and that Americans should not fear China but should instead learn from it. (The 'Fear of China' Theory is Groundless Worry; Learning from China is the Right Path, International Finance News, August 1, 2005)
In reality, any country must consider national economic and financial security. Russia, for instance, does not allow Chinese oil companies to acquire shares in Yugansk. Why should Chinese people not consider financial security? Everyone knows that listed companies must disclose information; there are no secrets from major shareholders.
Just as some people were looking to international investors to help reform China's banks, the media reported:
Bank of China sold a 10% stake to the Royal Bank of Scotland, Merrill Lynch, and the Li Ka-shing Foundation in August this year. However, reports indicate that Merrill Lynch has already secretly transferred part of its shares to two hedge funds with offices in Hong Kong. It seems Merrill Lynch is not an "equal partners" strategic investor, but merely a tactical speculator, looking to make a quick buck and run—no different from domestic brokers.
In comparison, Chinese people only argue that state-owned banks were sold too cheaply; they have not even raised a "foreign threat theory," yet they are accused by Professor Wu of being "prone to nationalist sentiment." Is this not a double standard?
In academic discussion, one cannot use double standards. Why does Professor Wu criticize Chinese people for having nationalist sentiments? Do Americans not have them? Professor Wu says, "A rule for academic discussion should be established; without such a rule, I am not prepared to participate." Yet he continues to issue statements commenting on views he disagrees with. We are left wondering: is Professor Wu participating in the discussion, or is he not?
Web Editor: Jia Fei